New businesses lagging on the East Side

Cassie Kim talks to her husband, Jongman Kim, about their plans for the evening at their East Meadows apartment in San Antonio on Dec. 15, 2017.

Cassie Kim talks to her husband, Jongman Kim, about their plans for the evening at their East Meadows apartment in San Antonio on Dec. 15, 2017.

Photo: SAN ANTONIO EXPRESS-NEWS / SAN ANTONIO EXPRESS-NEWS

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Cassie Kim and her husband, JongMan Kim, talk at their East Meadows apartment as they get ready to go out for the evening in San Antonio on Dec. 15, 2017.

Cassie Kim and her husband, JongMan Kim, talk at their East Meadows apartment as they get ready to go out for the evening in San Antonio on Dec. 15, 2017.

Photo: SAN ANTONIO EXPRESS-NEWS / SAN ANTONIO EXPRESS-NEWS

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Cassie and Jongman Kim leave their East Meadows apartment to go see “The Nutcracker” at an East Side landmark, the Carver Community Cultural Center.

Cassie and Jongman Kim leave their East Meadows apartment to go see “The Nutcracker” at an East Side landmark, the Carver Community Cultural Center.

Photo: Lisa Krantz / San Antonio Express-News

New businesses lagging on the East Side

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By some measures, life has improved inside EastPoint, a 3.5-square-mile area on the historically blighted East Side, where since 2011 more than $200 million in federal grants and other public and private money has sought to reduce poverty.

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City officials report that once-dying schools are at full enrollment. Low-income residents have new and more affordable places to live. More children are enrolled in higher-quality early childhood education. Infrastructure — sidewalks, streets, lighting — has been updated. Job training programs are giving people new work skills.

One sector has lagged, though: economic development — despite new business growth being one pillar in the overall anti-poverty push.

In the past six years, only 90 for-profit businesses have received certificates of occupancy in the three ZIP codes — 78208,78202 and 78203 — that comprise the so-called footprint, a once predominately African-American community that is home to 18,000 residents. That’s an average of 13 a year.

Virtually all of those were for small businesses — cafes, mom-and-pop stores, offices and the like — not the sort of large-scale employers that could bring hundreds of jobs to the area and function as true economic game-changers.

Many residents who earn those job-training certificates find they have to leave their neighborhoods to put them to use, officials said. A good chunk work in the Medical Center, which for those without personal transportation means a two-hour bus ride each way, one official noted.

The unemployment rate in the larger, 22-square-mile Promise Zone — an area designated by President Barack Obama in 2014 that doesn’t bring any funds but gives nonprofits a leg up in getting grants, and includes the footprint — has dropped to 10 percent, down from 15 percent since before the anti-poverty programs began. That’s still more than triple the 3.2 percent rate of San Antonio overall.

Jackie Gorman, CEO of SAGE, or San Antonio for Growth on the Eastside, a nonprofit that since 2008 has tracked and encouraged business development in the area, said EastPoint is hamstrung when it comes to attracting large-scale employers.

“No. 1, we don’t have large tracts of open land,” she said. “I’m not talking about residential land but large, vacant commercial land. We’re working with someone now who needs about 3 acres (of commercially zoned land), and you wouldn’t believe how hard it has been to find that.”

Another problem is a lack of new housing stock — as opposed to older homes in need of renovation — where employees of a major company might live, Gorman said. Yet another is a lingering perception that the East Side is not a safe and desirable place to live, despite a red-hot gentrification craze in some blocks of the neighborhood.

For example, many of those who work at Joint Base San Antonio-Fort Sam Houston, on the lip of the footprint just across a highway, choose to live in Schertz or even New Braunfels, she said.

Another factor is the issue of disrupting low-income communities, already under threat, some argue, by the rising rents, housing costs and property taxes associated with gentrification.

The median housing price in the footprint before the advent of urban renewal was $45,000; today, it’s $160,000 to $200,000. Stately mansions and quaint cottages can go for far higher in the gentrifying neighborhoods of Dignowity Hill, Government Hill and Denver Heights.

“You don’t want to have to come in (to residents) and say, ‘Sorry, we need to buy up these three or four blocks to build our business,’” said Michelle Vigil, senior management analyst for the city’s Office of EastPoint.

There have been some glimmerings of change, as far as large employers coming to EastPoint.

The nonprofit Texas Research & Technology Foundation recently bought the historic, 4.8-acre Merchant’s Ice site, a former industrial complex at Houston and Cherry streets, which had sat vacant for more than a decade. The foundation plans to create a mixed-use development that includes a boutique hotel, apartments and an “innovation center” catering to local bioscience, cybersecurity and emerging technology start-ups.

ChildSafe, a child-advocacy center that helps families dealing with abuse, is building its $33 million new headquarters on 36 acres of wooded land in the larger Promise Zone, at Interstate 10 East and Houston Street. An $8 million University Health System’s medical clinic is slated to open in the footprint next month.

Also, the state plans to issue “requests for proposals” from developers to redo the G.J. Sutton Building, vacant since 2014 when state employees abandoned the 6-acre complex because of bats and a crumbling foundation. The plan is to convert it into a leased or owned mixed-use project to include residential living, retail and possibly office space for state employees, officials said.

A local developer has bought 400,000 square feet of space formerly belonging to a school district in Government Hill, in the Promise Zone, to be turned into office space, apartments, retail, restaurants and entertainment venues.

Another project, still under debate, is Echo East, a proposed 20-acre development south of the AT&T Center, on the border of the footprint. That plan, which features 532 apartments and a 28,000-square-foot shopping space, would represent one of the East Side’s largest construction projects since the arena.

Aside from the military base, the two largest employers in EastPoint — Coca-Cola and the AT&T Center — have been in place for decades and have done little to incubate business growth.

Indeed, when the sports stadium was built in 2002, overheated rhetoric proclaimed it would transform the entire area. That didn’t happen.

The same could be said of St. Paul Square, an entertainment/retail/office complex next to a historic train depot. (A major real estate firm recently bought up buildings in the square it plans to revitalize, officials said.)

It doesn’t help that many affluent East Siders who live in their upscale condos and renovated Victorian mansions leave the footprint each day for high-paying jobs elsewhere, Gorman observed. Still, the steady trickle of new cafes, tattoos parlors and convenience stores in EastPoint is a sign things are moving in the right direction.

“What we know is that small businesses drive the economy of any community,” she said. “So the idea that we are growing our economy with small businesses is not necessarily a bad thing.”

Resident concerns

Gorman said one other factor hampering business development on the East Side is the fear among some developers that residents will rise up and resist if they don’t think a residential or commercial project is in the communities’ best interest.

There are some grounds for this fear. Take the Echo East project. Nearby residents have agitated in public meetings over their worry the development will increase traffic and cause property taxes to soar. They don’t like the idea that more apartments will go up, instead of affordable homes residents can buy. And they accuse the Michigan-based developer of keeping them in the dark over plans for the project.

The project would bring jobs, housing and retail to the surrounding area, all things it sorely needs, said state Rep. Barbara Gervin-Hawkins, who, along with the city, owns part of the vacant land as a holdover of a nonprofit she used to lead.

“We gotta stop dreaming small. We gotta start dreaming big,” she proclaimed at a recent East Side community meeting.

A similar uproar has centered on plans to build a four-story, 148-unit apartment, retail and restaurant complex on vacant land next to the city-owned Hays Street Bridge at 803 N. Cherry St. The battle has reignited a long-running dispute that the area around the iconic bridge must be shielded from development.

The bridge, which is in the National Register of Historic Places, is a key pedestrian connection to the East Side and is a picturesque place for people snap pictures, take yoga classes, skateboard or push a baby stroller.

The city has given the developers $1.2 million in incentives to develop the project, which critics say is ugly, blocks both the view from the bridge and of the bridge itself, and will raise property taxes. In early December, the Historic and Design Review Commission voted down the proposed development, siding with residents and activists.

Improvements will be made to the design and the developers will try again, said Eugene Simor, owner of Alamo Beer Co., located next to the bridge, who has partnered with developer Mitch Meyer to build the complex.

Gorman said she doesn’t believe residents are against business development.

“The challenge is our partners sometimes don’t reach out to the neighborhood early enough in the process to get buy-in,” she said.

But even the mere perception of resident reluctance is enough to prompt some developers to take their projects elsewhere, even if the land is more expensive, Gorman said.

Graciela Sanchez, director of the Esperanza Peace and Justice Center and a member of the Hays Street Bridge Restoration Group, is among those who’ve called for a halt of the proposed apartment project. She said the bridge is the “second most Instagrammed image in the city” and needs to be protected.

“We want to preserve this bridge for the use of all San Antonio, not just the East Side,” she said. “Sadly, what we have now are individuals who are greedy and just want to develop and build this monstrosity.”

Sanchez joins some East Side residents and activists who criticize a trend in the footprint wherein more than 40 homeowners have turned their properties into tourist places, through services like Airbnb, a move that brings transient people into the neighborhood and works against community connectedness, they say.

Sanchez scoffs at the developers’ suggestion that the proposed $1,000 monthly rents at the apartment complex — called the Bridge — would be affordable for most East Side residents, and that the complex will bring jobs to the area, beyond maintenance and other lower-paying jobs.

But like Gorman, she welcomes the influx of small businesses, which she said has been the “life-blood” of inner-city neighborhoods for decades.

Small businesses thriving

On any given afternoon, the outdoor picnic tables at Dignowity Meats at 1701 E. Houston St. are filled with day workers, hipsters and residents chowing down on house-smoked pastrami or turkey caprese sandwiches.

Co-owner Andrew Samia, who previously ran a food truck, said his partner, Denise Aguirre, came across the building when they were looking for a brick-and-mortar place in 2015.

“We decided it was a really good building and we saw more growth coming in this direction, with all the local and national (anti-poverty) programs,” Samia said. “Plus, we were able to get a pretty cheap lease, which gives us the capacity to withstand slow business, when it happens. We were able to take on more risk.”

Some of that risk included having the restaurant broken into in the early days — they’ve since upgraded their security and police have stepped up patrols — as well as having to fix plumbing and other issues of an older building. But it’s all been worth it, Samia said. Business is good and only stands to get better.

They used a $10,000 facade-improvement grant from SAGE to expand outdoor seating and decks. Samia said the “vibe” of the neighborhood reminds him of the small East Coast town he grew up in.

“People here look out for each other,” he said. “It would be nice to have the foot and tourist traffic like the Pearl or Southtown, but we see a lot more customers coming in this direction. We love it.”

Andrew Douglas, president of Douglas Architects, said he and his wife, co-owner Melissa Douglas, looked for more than a year when they were ready to relocate from their original office at 118 Broadway downtown.

When they found an old, 5,000-square-foot auto supply store at 1320 E. Houston St. in the footprint three years ago, they knew it was the right place. It had everything — parking, enough square footage to rent out space to two other businesses to increase their revenue, a building that could be remodeled as needs dictated.

Douglas, who oversees a nine-person staff, said the growing residential and commercial development happening around their headquarters is a clear harbinger of better days to come.

“It reminds me of LoDO,” he said, referring to a bustling entertainment and business district in lower Denver that has been revitalized in recent years.

“Every month, our business gets a little bit better,” said Brian Labarbera, owner of Estate Coffee, who rented space for his coffee shop since 2015 from Douglas Architects.

New businesses may be thriving, but drive up and down North New Braunfels Avenue, the “commercial spine” of the footprint, and for every new restaurant or shop, it seems there are several unsightly, boarded-up buildings, courtesy of absentee landlords, Gorman said.

The businesses that are there tend to be ones that cater to low-income neighborhoods — pawn shops, dollar stores, fast-food joints and title loan companies.

Last January, the City Council expanded the enforcement of a vacant building ordinance passed earlier to include parts of the EastPoint area, including the corridor. It’s a registration program that encourages property owners of vacant buildings to maintain their buildings or face heavy fines, and requires them to renovate the property within a reasonable time.

Under SAGE’s tutelage, a fledgling business owners’ association along the corridor has formed, encouraging participants to take more pride in the businesses, Gorman said. The nonprofit’s facade improvement program has given out $900,000 in grants to help business owners upgrade their storefronts; some qualified businesses have received below-market loans.

Chicken or egg?

Mike Etienne, director of the city’s EastPoint office, said the issue of housing and business development is interrelated: If you build residences for people, the businesses that cater to them — dry cleaners, markets, movie theaters, coffee shops — will follow.

“It’s a chicken-or-egg thing,” he said.

Attracting residents to the East Meadows apartment complex, the first phase of an overall $120 million federal housing renewal program in the heart of EastPoint, has proved easy.

The 215 units are fully leased, with a waiting list, not just for one of the 81 government-subsidized apartments for low-income residents, but for the 75 affordable, income-based units and 59 market-rate units as well. Built on the site of a former derelict, 1940s public housing project with one of those large federal grants and other money, East Meadows is lushly landscaped, upscale and would be at home in Stone Oak.

The second phase of East Meadows — an 80 apartments for residents 62 years and older — should be completed by the end of January, with residents moving in starting in February, officials said. The last phase of the project, a 119-unit apartment complex, is scheduled to begin construction in May.

The waiting list “is a good problem to have,” said Lorraine Robles, spokeswoman for the San Antonio Housing Authority. For low-income residents, whose incomes must be 60 percent or below the average median income, a one-bedroom costs $605 a month. In contrast, the market-rate for the same is $799 a month.

Of the former residents of Wheatley Courts, that derelict housing project, 41 have returned to East Meadows, and an additional 15 former households plan to return, when a unit opens in Phase One or in the senior housing units or in phase three, Robles said.

Cassie Kim, 42, who lives in one of the market-rate units at East Meadows, said she’d heard chat-board rumors to avoid the East Side when she was researching moving to San Antonio from Fort Gordon in Georgia.

Kim, whose husband Jongman Kim, 37, now is a trainee in a biomedical equipment tech program at Fort Sam Houston, disregarded the negative talk. Being able to rent a spacious, three-bedroom apartment for $1,000 a month was a definite incentive, as was being so close to the post.

The couple moved here in March. Although they’ll be leaving for Fort Meade in Maryland in February, they’ve loved living at East Meadows, she said.

“The staff are great, the security is good, the grounds are nice, the people are friendly,” said Kim, who didn’t know the complex was part of an urban renewal program when she signed the lease. “Sure, there’s the occasional police helicopter or cop cars, but look where you are. It’s to be expected.”

Surrounding East Meadows are residential blocks marred by vacant homes and lots, as well as homes in states of neglect. Etienne said the city competes with the private market in trying to buy up these properties to build anew or renovate; some property owners, seeing the gentrification trend, hold out for high prices, he said.

But the fact that some established East Side businesses — such as a large catering company and a popular restaurant — have chosen to stay and relocate within the Promise Zone, just slightly outside the footprint, is a sign that tide slowly is turning in favor of East Side commercial development, Etienne said, which will progress hand-in-glove with residential strides.

“This is a slower-paced (commercial) growth, that gives residents time to catch up,” EastPoint analyst Vigil said. “This is not like the Pearl, where 10 new businesses pop up in one week.”

The three federal grants that sought to improve schools, neighborhoods, housing and crime either have ended or are in the process of ending.

Now the truly hard work begins: Sustaining what progress has been made into the future, a task that rests largely in SAGE’s hands. It’s Gorman’s job to coordinate local nonprofit partners to pass the baton forward, to make sure people — and businesses — continue to come to the East Side.

When asked recently to provide numbers on new businesses and business closures on the East Side over the past several years, Gorman said she couldn’t provide that information because she “doesn’t trust” her agency’s data.